Correlation Between Dow Jones and Allstate
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Allstate at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Dow Jones and Allstate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and The Allstate, you can compare the effects of market volatilities on Dow Jones and Allstate and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Dow Jones with a short position of Allstate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Allstate.
Diversification Opportunities for Dow Jones and Allstate
Poor diversification
The 3 months correlation between Dow and Allstate is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and The Allstate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allstate and Dow Jones is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Dow Jones Industrial are associated (or correlated) with Allstate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allstate has no effect on the direction of Dow Jones i.e., Dow Jones and Allstate go up and down completely randomly.
Pair Corralation between Dow Jones and Allstate
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.93 times more return on investment than Allstate. However, Dow Jones is 1.93 times more volatile than The Allstate. It trades about 0.18 of its potential returns per unit of risk. The Allstate is currently generating about 0.13 per unit of risk. If you would invest 4,109,142 in Dow Jones Industrial on August 28, 2024 and sell it today you would earn a total of 376,889 from holding Dow Jones Industrial or generate 9.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. The Allstate
Performance |
| Timeline |
Dow Jones and Allstate Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
The Allstate
Pair trading matchups for Allstate
Pair Trading with Dow Jones and Allstate
The main advantage of trading using opposite Dow Jones and Allstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Allstate can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Allstate will offset losses from the drop in Allstate's long position.| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
| Allstate vs. Aspen Insurance Holdings | Allstate vs. Selective Insurance Group | Allstate vs. Aspen Insurance Holdings | Allstate vs. AmTrust Financial Services |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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